Industrial Output Falls; Consumers More Upbeat

U.S. industrial output stumbled badly in October, but consumers’ spirits rose early this month, according to reports released Friday that showed an economy ailing but not crumbling.

Another report showed an unexpectedly sharp rise in wholesale prices, the largest in nearly two years. However, economists dismissed the gain as a reflection of temporary factors and not a sign that long-dormant inflation was stirring.

Industrial production dropped 0.8% last month, the third consecutive decline and the biggest slide since September 2001, the Federal Reserve said. Economists had expected a drop of just 0.3%.

Although that report showed the manufacturing sector, which bore the brunt of last year’s recession, backsliding, a separate survey of consumers offered hope the economy would manage to hold its ground.

The University of Michigan’s preliminary November consumer sentiment index rose to 85 from a nine-year low of 80.6 in October, market sources said. That put a halt to a five-month slide in sentiment and beat forecasts of an increase to 82.3.

The data helped calm concerns the holiday shopping season could prove disturbingly weak, although the optimistic tone was tempered by the industrial output report, which showed an economy still mired in what Fed Chairman Alan Greenspan referred to Wednesday as a “soft patch.”

Factory output, which accounts for the largest portion of total industrial production, slid 0.7% in October, its third straight monthly drop, but at least some of the decline was due to an auto parts shortage from a shutdown of West Coast ports that curtailed car makers.

Nonetheless, industrial output, excluding autos, was down 0.4%, while output outside the high-tech sector -- computers, semiconductors and communications equipment -- fell 0.9%.